All these appeals involve identical issues and are, therefore, disposed
of by this judgment which will cover each of the appeals.

Appellant in each case questions correctness of the view expressed by
Central Board of Excise and Customs, New Delhi (hereinafter
referred to as
the 'Board') in Circular dated 19.10.2000 purporting to clarify that
Additional Excise Duty (in short 'AED') under
the Additional Duties of
Excise (Textiles and Textile Articles) Act, 1978 (in short the 'Additional
Excise Act') would also be leviable
on yarns manufactured by 100% Export
Oriented Undertakings (in short 'EOU') from indigenous raw materials and
cleared into Domestic
Tariff Area (in short 'DTA'), in addition to the Basic
Excise Duty (in short the 'BED') payable under the Central Excise Act,
1944
(in short the 'Act'). Appellants also questioned legality of the
Notifications issued by the Central Excise authorities for payment
of AED
on yarn cleared in DTA.

The appellants are registered as 100% EOUs engaged in the
manufacture of cotton yarn out of indigenous raw materials attracting
BED
leviable under Section 3 of the Act and AED leviable under Section 3 of the
Additional Excise Act. On the basis of exemptions
granted by the Central
Government from time to time under Section 5A (1) of the Act, Notification
No.55/91-CE dated 25.7.1991 was
made applicable to their cases for the
purpose of exemption. Subsequently, Notification No. 8/97-CE dated
1.3.1997 was issued where
certain manufacturers like the present appellants
were only granted exemption in excess of the amount equal to the duty of
excise
leviable under Section 3 of the Act on like goods produced or
manufactured in India other than in 100% EOUs or a free trade zone
if sold
in India. Subsequently, the said Notification was amended by Notifications
Nos. 21/97-CE dated 11.4.1997, 7/98-CE dated
2.6.1998 and 11/2000-CE
dated 1.3.2000. As a result of these amendments what came to be exempted
was the amount in excess of the
duties of excise leviable under the Act or
under any other law for the time being in force.

The question that arises in these appeals is whether by addition of the
words "or under any other law for the time being in force"
producers or
manufacturers other than 100% EOUs incur a liability to pay AED. The
Board issued a Circular dated 19.10.2000 clarifying
that it is so payable and
Notification No.55/91-CE is no longer of any assistance to the
manufacturers like the appellants. The view
expressed in this circular was
challenged in several Civil Writ petitions before the Punjab and Haryana
High Court. By the impugned
judgment the High Court dismissed the writ
petitions holding that introduction of the words "or any other law for the
time being
in force" took away exemptions granted to the manufacturers like
the appellants under Notification No.55/91-CE. All the writ petitions
were
disposed of by a common judgment which forms the subject matter of
challenge in these appeals.

Learned counsel for the appellants submitted that both the Board and
the High Court failed to notice that the introduction of the
words "or any
other law for the time being in force" did not in any way affect the
exemption flowing from Notification No.55/91-CE.
What the appellants
were required to pay was the basic excise duty and AED as their counter
parts who were not 100% EOUs were required
to pay. That had nothing to
do for creating a liability of AED so far as the appellants are concerned.

In response, learned counsel for the Union of India submitted that the
view expressed in the Circular and endorsed by the High
Court does not
suffer from any infirmity. The basic intention which is clear from a bare
reading of a Notification No.8/97-CE as
amended by Notification
No.11/2000-CE dated 1.3.2000 is that a manufacturer who is 100% EOU is
not in more advantageous position
vis-`-vis the others.

The relevant Notifications and the Circular read as follows:

"Notification No.55/91-CE dated 25.7.1991-
Exemption from additional duty to all excisable goods
produced or manufactured in a
100% Export Oriented
Undertaking- In exercise of the powers conferred by sub-
section (1) of Section 5A of the Central Excises and
Salt
Act, 1944 (1 of 1944), read with sub-section (3) of
Section 3 of the Additional Duties of Excise (Textiles
and Textile Articles)
Act, 1978 (40 of 1978), the Central
Government being satisfied that it is necessary in the
public interest so to do, hereby exempts
all excisable
goods produced or manufactured in a hundred per cent
Export Oriented Undertaking from the whole of the duty
of excise
leviable under the second mentioned Act.

In exercise of the powers conferred by sub-section
(1) of Section 5A of the Central Excise Act, 1944 (1 of
1944), the Central Government,
being satisfied that it is
necessary in the public interest so to do, hereby exempts
the finished products, rejects and waste or
scrap specified
in the Schedule to the Central Excise Tariff Act, 1985 (5
of 1986) and produced or manufactured, in a hundred per
cent export-oriented undertaking or a free trade zone
wholly from the raw materials produced or manufactured
in India, and allowed
to be sold in India under and in
accordance with the provisions of sub-paragraphs (a), (b),
(c), (d) and (f) of paragraph 9.9 or
of paragraph 9.20 of
the Export and Import Policy, Ist April 1997 - 31st
March, 2002, from so much of the duty of excise leviable
thereon under Section 3 of the Central Excise Act, 1944
(1 of 1944), as is in excess of an amount equal to the duty
of excise leviable
under the said section 3 of the Central
Excise Act, on like goods, produced or manufactured in
India other than in a hundred per
cent export-oriented
undertaking or a free trade zone, if sold in India.

Provided that nothing contained in this
Notification shall apply where such finished products, if
manufactured and cleared by a
unit other than a hundred
per cent export-oriented undertaking or a unit in a free
trade zone, are wholly exempt from the duties
of excise
or are chargeable to Nil rate of duty.

Effective rate of duty on certain goods produced in FTZ
or EOU In exercise of the powers conferred by sub-
section (1) of Section
5A of the Central Excise Act, 1944
(1 of 1944), the Central Government, being satisfied that
it is necessary in the public interest
so to do, hereby
exempts the finished products, rejects and waste or scrap
specified in the Schedule of the Central Excise Tariff
Act, 1985 (5 of 1986) and produced or manufactured, in
a hundred per cent export-oriented undertaking or a free
trade zone wholly
from the raw materials produced or
manufactured in India, and allowed to be sold in India
under and in accordance with the provisions
of sub-
paragraphs (a), (b), (c), (d) and (f) of paragraph 9.9 or of
paragraph 9.20 of the Export and Import Policy, Ist April,
1997
31st March, 2002, from so much of the duty of
excise leviable thereon under section 3 of the Central
Excise Act, 1944 ( 1 of 1944)
as is in excess of an
amount equal to the aggregate of the duties of excise
leviable under the said section 3 of the Central Excise
Act or under any other law for the time being in force on
like goods, produced or manufactured in India other than
in a hundred per
cent export-oriented undertaking or a
free trade zone, if sole in India.

Provided that nothing contained in this notification
shall apply where such finished products, if
manufactured and cleared by a
unit other than a hundred
per cent export-oriented undertaking or a unit in a free
trade zone, are wholly exempt from the duties
of excise
or are chargeable to Nil rate of duty.

1. I am directed to state that representations have
been received in the Board seeking clarifications
as to whether Additional Excise
Duty under
Textile and Textile Articles Act, 1978 hereinafter
referred to as AED (T&TA) is leviable or not on
cotton/man made yarns
manufactured and cleared
into DTA by a 100% EOU using indigenous raw
materials. It has been represented that some field
formations
are demanding additional duty under
the above mentioned Act on goods manufactured
and cleared into DTA though there is specific
exemption
for such goods vide Notification No.

55/91-CE, dated 25.7.1991 and hence no
Additional Duty will be attracted.

2. The matter has been examined. It is observed that
as per proviso to Section 3 (1) of the Central
Excise Act, 1944 goods produced
in a 100% EOU
and allowed to be sold in India are liable to excise
duty which is equal to the aggregate of duties of
customs leviable
on like goods when imported into
India. On import of textile yarns, apart from Basic
Customs duty, goods will also be subject to
Additional Duty of Customs (countervailing duty)
which will be equivalent to total duties leviable as
duty of excise on like goods
produced in the
country. (This CV duty will thus include basic
Central Excise Duty under Central Excise Act plus
Additional Duty
of Excise under T & TA Act).

3. Notification No.8/97-CE dated 1.3.1997, as
amended by Notification No.11/2000-CE dated
1.3.2000 provides that the excise duty payable
by a
100% EOU under Central Excise Act in respect of
the finished goods manufactured exclusively from
indigenous raw material and
cleared into DTA
would be restricted to the "aggregate of the duties
of excise leviable under the said Section 3 of the
Central Excise
Act or under any other law for the
time being in force, on like goods produced or
manufactured in India other than in a hundred per
cent export oriented undertaking or a free trade
zone". In other words, such yarns produced and
cleared from 100% EOUs to DTA are
required to
suffer under Central Excise Act itself , by virtue of
this exemption, duty which is equal to Basic
Excise Duty on yarn
plus AED (T & TA) leviable
on yarn produced.

4. Since over and above the duty leviable under
Central Excise Act, goods produced in a 100%
EOU and cleared into DTA, would also
be leviable
to Additional Excise Duty under Textile & Textile
Articles Act, Notification No.55/91-CE dated
25.7.1991 was issued which
exempted all
excisable goods produced or manufactured in a
100% EOU from the whole of duty of excise
leviable thereon under AED (T
& TA). Thus,
effect of Notification No.8/97-CE as amended and
55/91-CE is to restrict the yarn stage duty to Basic
Duty under Central
Excise Act plus AED leviable
under Textiles and Textile Articles Act.

5. The amendment to the Notification No.8/97-CE
dated 1.3.1997, as mentioned in Para 2 above,
wherein "or under any other law for
the time being
in force" has been inserted, is significant and
brings parity in the excise duties payable by a
100% EOU on yarns
produced exclusively from
indigenous materials on their domestic clearances
and a domestic manufacturer manufacturing
similar goods
from indigenous materials.

6. Thus, it is clarified that w.e.f. 1.3.2000, AED (T &
TA) would also be leviable on yarns manufactured
by a 100% EOU from indigenous
raw materials
and cleared into DTA, in addition to the Basic
duties under Central Excise Act. Wherever, such
AED (T & TA) are not
being collected, suitable
steps for recovery may be taken expeditiously."
Contrary to what has been contended by the Union of
India, a bare
reading of the Notification No.8/97-CE dated 1.3.1997 and as amended by
Notification 11/2000-CE dated 1.3.2000 shows
that there was clear intention
to rationalize the payment of duty by 100% EOUs and others. What is
clearly intended relates to the
liability of the manufacturer who is 100%
EOU to pay the amount which amounts to aggregate of the duties of excise
leviable under
Section 3 of the Act or under any other law for the time being
in force. That clearly indicates that whatever duty of excise was
leviable
under the Act and any other statute for the time being in force on the like
goods produced or manufactured in India by the
producer or manufacturer
who is not 100% EOU if sold in India. The obvious object was to see that
the manufacturer who is 100% EOU
does not steal a march over his counter
part selling like goods in India. The earlier benefit given to the EOUs was
for any duty
payable under Section 3 of the Act which is in excess or the
duties paid by its counterparts.

A perusal of the un-amended notification 8/97-CE and notification
after amendment vide Notification No.11/2000-CE shows that only
the
following words were inserted by way of amendment:

(i) introduction of the words "the aggregate of" after words "equal
to" in the original notification.

(ii) introduction of the following words after "Section 3 of the
Central Excise Act" in the original notification i.e. "or under
any other law
for the time being in force".

That does not in any way create a liability on the 100% EOUs to pay
AED. Notification No.55/91-CE dated 25.7.1991 is in no way
diluted so far
as the manufacturers like the appellants are concerned, notwithstanding what
has been provided in Notification No.8/97-CE
dated 1.3.1997 as amended by
Notification No.11/2000-CE dated 1.3.2000. As stated above, the only
change is that under Notification
8/97-CE dated 1.3.97 the 100% EOUs were
exempt from paying duty in excess of amount of BED paid by the producer
or manufacturer
who is not 100% EOU, whilst after amendment by
Notification 11/2000-CE dated 1.3.2000 the 100% EOU is exempt from
paying duty in
excess of amount of BED plus the amount of AED plus any
other duties of excise under any other law for the time being in force, paid
by the producer or manufacturer who is not 100% EOU. Thus, the view
expressed in the Circular dated 19.12.2000 and view of the High
Court are
indefensible. The Circular afore-noted is, therefore, quashed.

The High Court's judgment impugned in these appeals is set aside.

The appeals are allowed to the extent indicated with no order as to
costs.

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